Inventory management: combining business intelligence & material handling hardware
Inventory management:
combining business
intelligence & material
handling hardware
Most business intelligence
(BI) tools and supply
chain management (SCM)
applications address inventory
issues from either a software
perspective or a material
handling perspective; however
there is nothing on the market
that binds both hardware and
software solutions together to
form a complete end-to-end
solution for managing inventory.
For example, SCM applications
typically require that the user
enter either shrink or scrap
factors into the system. This
injects inaccuracies that
have an accumulating effect
over time. The difficulty lies
in the complexity of moving
inventory through a variety of
stages through the production
process where there are no
transactional requirements or
no validation of transactions
that take place. Such inventory
challenges include support
for reducing non-value added
labor dedicated to surface
mount technology (SMT) set up
and kitting functions, ineffective
use of floor space, reducing
inventory inaccuracy and low
SMT machine utilization, all of
which results in lost margin and
cash flow opportunities.
Bob Douglas
Inovaxe Corporation,
Sarasota, FL, USA
bdouglas@inovaxe.com
Keywords:
Inventory control,
inventory management,
supply chain
management, business
intelligence, material
handling
www.globalsmt.net
Market assessment
Much software has been
developed to support
MRP or accounting
functions, but most
come to an abrupt stop
at managing inventory.
Tremendous manual
efforts to effectively
manage inventory have
yielded little to no
results while consuming
additional resources and
generating substantial
expenses.
It is widely known
that most electronic
manufacturing
companies have
achieved near perfect
inventory accuracy
for their bonded
inventories. However
inventory accuracy
falters outside of the
bonded stockroom where
Figure 1. The lost opportunity costs of an inefficient inventory system.
inventory accuracy turns
into best guess in most
cases. Companies typically perform annual
Business challenges
physical inventories, but this does little more
No matter the effort expended on managing
than inject additional inaccuracies into the
inventory, most executive management
perpetual inventory.
understands that inventory is regarded as a
Additionally, there is a decoupling in the
‘black hole’, absorbing cash and resources. With
software platforms and the material handling
appropriate business intelligence, ‘black holes’
hardware. The lack of a linked material
can be effectively addressed, and the company
handling and software solution creates a lack
will realize a direct effect on bottom line
of discipline in the process, whereas proven
profit and customer satisfaction. Some of the
material handling techniques and transactional
challenges facing business include:
discipline are forgotten. The results are surprise
• To reduce inventory inaccuracy of inventory.
shortages, excessive labor spent monitoring
• To improve visibility to data that can help
inventory, and expediting materials to ‘make
identify inventory positions and potential
up’ for the shortages. In addition to the
stock out issues.
obvious costs associated with these issues are
• To reduce the non value added labor
the lost opportunity costs that result from
dedicated to the management of physical
cash and manpower that could be directed at
inventory and material kitting.
opportunities to grow the business.
• To increase the useful production space
Global SMT & Packaging - November/December 2006
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Inventory management: combining business intelligence & material handling hardware
through the reduction of inflexible floor
space dedicated to the bonding physical
inventories.
• To minimize system move transactions
and the multiple requirements to handle
physical inventory.
• To reduce all areas with the potential to
inject inaccuracies into the perpetual
inventory with special focus on those
areas where there is the potential for
accumulation of error without a
systematic recognition or potential to
self correct.
• To increase the utilization of expensive
SMT equipment through the reduction
of set up times and reloading of feeders.
Lost opportunity cost
Figure 1 denotes several factors that
consume cash due to inventory
management issues. The real issue with
these cash constraints, however, is the
opportunities lost that could be benefiting
the business, such a purchasing a latest
technology piece of equipment or paying
off debt.
When looking at managing inventories,
several major topics come to light:
inventory inaccuracy, non-value-added
labor and inefficient use of floor space for
bonded materials.
Inventory inaccuracy
Excessive partial component reel
or tube packages
When initially setting up a machine
or replacing packages on the machine,
machine operators gravitate to the use of
full packages in order to minimize how
often a package needs to be changed
out. This results in excessive partial reels
in inventory. It is almost impossible to
determine the remaining quantity on a
reel, so most people just guess. Each guess,
whether high or low, further reduces the
accuracy of inventory. The only truly
accurate count is for full and empty reels.
Kit to kit material movement
Because many jobs are kitted prior to
being set up on the SMT machine, the
components assigned to the kits are no
longer in a bonded, locked-down condition
and are subject to being stolen from
one kit to be used in other without any
transactional discipline. Of course, this
leads to shortages in the job that was 100%
kitted, which tends to lead to a repetition
of the cycle of stealing from kit to kit.
Figure 2. Sources of inventory inaccuracy.
or bucket to wait to be loaded on the SMT
machine. This material handling method
can result in component damage as reels
are piled onto each other or as operators
rummage through the bin looking for the
correct components.
Non-value-added labor
Non Value Added labor managing
bonded stock rooms
Excessive dependence on non-value-added
stock room personnel and material
handlers is a direct expense to the bottom
line of the company.
Excessive physical and systematic
move transactions
The process starts with the receiving
personnel, with a PO receipt transaction,
followed by a move to bonded stock,
where inventory is noted the system and
physically moved to a location. Upon kit
request, the process happens again with
a physical movement of product from
shelf to cart, followed by another system
transaction conducted.
Managing cycle counting programs is an
expensive proposition. NVA hours take
time out of the day to count inventory.
Inaccuracies are not traced to a root cause;
they’re simply fixed, which can inject
additional inaccuracies in the perpetual
system.
Add in a yearly wall-to-wall physical
count and the company has consumed
many hours of NVA labor and injected
more inaccuracies into the system than
were fixed.
A comprehensive solution is needed
A solution that combines business
intelligence software with material
handling equipment is needed to bridge the
gap left by traditional MRP/Accounting
software packages.
Minimize partial packages
The software should require operators to
use up partial packages before moving
onto full packages. This will minimize
the number of broken or partial packages
inventory. This can be done with a software
solution that is bound custom-configurable
carts - the software can then identify partial
packages and designate those for use first.
Component damage
Typically material that was stored carefully
while in bonded stock is thrown into a bin
Non-value-added labor managing
inventory discrepancies
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Global SMT & Packaging - November/December 2006
www.globalsmt.net
Inventory management: combining business intelligence & material handling hardware
Eliminate pre-kitting
Typical systems push material to a kit,
which makes it difficult to change materials
from one kit to another. A better solution
would have kits pulled based on need, as
they’re needed. This eliminates damage
to reeled components by eliminating the
tossing of reels and tubes into bins or
boxes. It also makes the operator’s job
easier - no more rooting through bins for
the ‘right’ reel of components.
Eliminate non-value-added personnel
By kitting directly into a cart that is tied
into the inventory system through software,
companies bypass the need to have a cagedoff stockroom and the NVA personnel
required to manage it. A combined
software/materials handing hardware
solution expands the locked stockroom
to all areas of the production floor. An
ideal system is a cart capable of holding
feeders to that kits can be presented to the
machine ready to go. This minimizes SMT
downtime by reducing setup time.
Put the right parts in the right place
Quality suffers when the wrong packages
are loaded into the wrong feeder location.
This can happen when your machine
operators must rummage through a bin of
materials. An integrated materials handling
system would force integrity by using a one
package/one location philosophy. This is
especially important in the face of lead-free
and RoHS directives.
Conclusion
An integrated materials handling hardware/
supply chain management software
solution can improve all aspects of your
manufacturing process, from quality to cost
to efficiency. Non-integrated inventory
‘solutions’ can leave you with excessive
partial component reels or tubes, prekitting and undocumented kit-to-kit
transfers, component damage, non-valueadded labor and floor space and the risk of
putting the wrong component in the
wrong place.
Increase your opportunity cost and
inventory accuracy and reduce your
non-value-added costs by seeking out
an integrated inventory solution that
joins business intelligence software with
materials handling equipment.
Figure 3. Activities that weigh down a company’s bottom line without adding value.
Free process consulations
Attending the IPC, APEX & Designers
Summit show? Take advantage of the
free Process Advice & Defect Clinic to be
held at booth #1580. Free and unbiased
help will be provided to assist visitors
with common process problems, RoHS
compliance issues & field failures.
Visitors are encouraged to bring board
assemblies for examination or process
problems for discussion. Inspection
equipment provided in the feature area
will assist visitors to better understand
the process problem and suggested
solutions.
The Process Advice & Defect Clinic is
organized by IPC and Global SMT &
Packaging magazine.
Sponsors:
www.globalsmt.net
Global SMT & Packaging - November/December 2006
The Process Advice & Defect
Clinic is led by international
consultant Bob Willis,
IPC lead-free auditor and
workshop instructor. Visit the
Process Advice & Defect
Clinic at booth #1580.
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